A Historical Look at Student Debt

Submitted by Doug Lederman on July 6, 2006 - 4:00am

The landscape for student borrowing has changed significantly in the last 15 years, in several ways: The federal government now has different rules for who can borrow (and how much debt they can take on), and, of course, the price of college has continued to shoot ever skyward. For those and other reasons, it's difficult to fully gauge the implications for today's borrowers of a study on student indebtedness released Wednesday by the U.S. Education Department's National Center for Education Statistics. But the report found that most borrowers who finished college in the early 1990s were able to manage their student loan burden without enormous strain.

It finds that 51 percent of all 1992–93 bachelor’s degree recipients had taken loans (an average of $10,200) to help pay for college. (About two in five graduates went on to enroll in a graduate or professional degree program by 2003, and 45 percent of them had borrowed for that education, with those who had borrowed averaging $36,900 in additional loans by 2003.)

Of those loan recipients who did not go on to get a degree beyond the bachelor's, "most appeared able to handle their debt," the study finds. About three-quarters had repaid all of their undergraduate student loans by the time they were interviewed as part of the study in 2003.

Those who had not paid off their debt within 10 years of graduating had a median debt burden (which the study defines as monthly loan payment divided by income) of 3.3 percent -- that proportion had declined over time, from 6.7 percent in 1994 to 4.8 percent in 1997, the study found. Not surprisingly, students who had borrowed the most had larger debt burdens -- those who had borrowed more than $15,000 for their undergraduate educations had a median debt burden of 4.5 percent, and those from the bottom quarter of the socioeconomic scale had a 6 percent debt burden (8 percent is considered reasonable, the study posits).

In addition, nearly 60 percent of those who did go on to get a graduate or first professional degree had also repaid all of their undergraduate debt by 2003, the report concludes.

The study's authors acknowledge that "the implications of these findings for current borrowers are difficult to assess," and on that point, policy makers who have been sounding the alarm about student loan debt agree wholeheartedly.

Robert Shireman, director of the Project on Student Loan Debt,[2] said in an e-mail message that the federal report "shows that low and moderate levels of debt for higher education are manageable and appropriate, assuming the economy cooperates and provides graduates with jobs."

And if student debt had stayed constant with inflation since 1992, Shireman said, "we would have little to worry about today." But today, two-thirds of graduates have student loans, compared to about half 15 years ago, and the average debt is now double what it was then.

"In short, the NCES report provides a useful analysis of an earlier generation of students," Shireman said. But "since then, there has been a sea change in tuition, financial aid policies, and how students pay for college. More recent generations, and future generations, are facing very different levels of debt and prospects for repayment."